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2 Payday Lending and State Regulation

Posted by: funnytodd   
April 1st,
2021

Payday lending is widespread. FDIC (2013) estimates that 4.7% of most U.S. households have actually at a while utilized payday lending, while Pew Charitable Trusts (2012) places the figure at 5.5% of U.S. grownups. In 2005, payday storefronts outnumbered McDonald’s and Starbucks areas combined (Graves and Peterson, 2008). Loan providers stretched $40 billion in payday credit this season, producing revenues of $7.4 billion (Stephens Inc., 2011).

Up to now the government that is federal perhaps maybe not directly regulated payday lending (save via basic statutes including the Truth in Lending Act plus the Military Lending Act), though this could alter given that the customer Financial Protection Bureau (CFPB) was provided rulemaking authority on the industry. Typically, payday financing legislation happens to be kept towards the states. Ahead of the mid-2000s, states’ capacity to control lending that is payday undermined by the so-called “rent-a-bank” model, wherein an area loan provider would partner with a federally-chartered bank perhaps perhaps not susceptible to that loan provider’s state rules, thus importing exemption from those rules (Mann and Hawkins, 2007; Stegman, 2007). Read the rest of this entry »